Banks Agree to Mortgage Grace Period as Virus Shreds Economy

SACRAMENTO, Calif. (CN) – California Governor Gavin Newsom delivered a dose of good news for homeowners on Wednesday, announcing the nation’s largest banks will voluntarily freeze mortgage payments for 90 days on families mired in the Covid-19 crisis.

Newsom said the agreement is the result of weeks of negotiations with the heads of banks like Wells Fargo, U.S. Bank, JPMorgan Chase and Citi as well as over 200 state banks and credit unions. The nonbinding agreement won’t have an income restriction, but applicants will have to document pandemic-related hardships.

“It is a significant framework to advance commitments that we have absolute certainty are real based upon personal commitments that I received directly from the leaders of these companies,” Newsom said in a press briefing Wednesday.

A Caltrans freeway sign reads: “Wash your hands, Stay healthy, Avoid COVID-19” in the San Fernando Valley section of Los Angeles. (AP Photo/John Antczak)

Vilified for their role in the Great Recession, the nation’s major banks are suddenly heeding California’s call for help. Newsom said further agreements could soon be made for ATM fees, overdraft penalties and commercial property loans.

“I want to just compliment them for their willingness to engage us and our team,” Newsom said.

The deal could impact millions of Californians and aside from mortgage relief, the banks have agreed to not report late payments during the crisis to credit reporting agencies. In addition, banks will halt foreclosure sales or evictions for at least 60 days and will waive mortgage-related late fees.

“Millions of California families will be able to take a sigh of relief,” Newsom said.

Newsom’s forbearance announcement comes hours after the White House and congress struck came to terms on a $2 trillion stimulus that includes direct payments for taxpayers, unemployment assistance and business loans. The Democratic governor thanked Congress for coming to terms on the stimulus and said it will provide a particular boost to the state’s unemployment network, which has received over 1 million new claims in the last two weeks.

“On behalf of the nation’s largest state, as governor of the world’s fifth largest economy in the state of California, let me applaud the Speaker, applaud Sen. Schumer, applaud Democratic leadership and the compromise that was advanced with Republicans,” Newsom said.

Covid-19, the new strain of coronavirus responsible for a global pandemic, has now affected more than 454,000 worldwide with over 61,000 confirmed cases throughout the entire United States, according to data compiled by Johns Hopkins University. Data shows nearly 21,000 have died globally from the virus, including over 880 deaths in the United States.

California issued the first statewide shelter-in-place order last week and ordered all but nonessential employees to remain at home. As of Wednesday morning, Newsom says the state has over 2,500 confirmed cases – third most of any state – along with 53 deaths.

In the daily rundown, he urged younger residents to comply with the shelter-in-place orders and noted 37 of the confirmed cases are people under the age of 17. Furthermore, 51% of the state’s total consists of people between the ages of 18-49 and 66,800 tests have been conducted statewide.

“These stay at home orders are real, and we want to maintain our vigilance,” Newsom continued.

Los Angeles County officials announced the nation’s first virus-related death of a minor patient on Tuesday, but they reversed course Wednesday and said they are no longer including the death in its Covid-19 count. California’s largest county has confirmed 799 cases and 13 deaths.

On Tuesday, Newsom ordered new measures to try and stop the spread of the virus through the state’s correctional system. Newsom’s executive action halts new intakes or inmate transfers at the state’s 35 prisons for 30 days and parole hearings will be done via videoconferencing.

Badly needed medical supplies are also on the way for California hospitals as according to Newsom the state has secured 100 million N-95 masks and already distributed 24 million.

Newsom also highlighted the “Herculean effort” to secure medical supplies and the contributions of the state’s private sector.

Virgin Atlantic has a plane en route to California from Hong Kong carrying 1 million masks and 150,000 test kits, Tesla CEO Elon Musk has committed to supplying hospitals with 1,200 ventilators and Bloom Energy has repurposed its manufacturing plant to produce ventilators.

“That’s good news, and for those health care leaders that are demanding more and deserve more, I want them to know when those get off the docks…we’re going to get them out as quickly as we humanly can,” Newsom said of the supplies.

Most of the banks have agreed to Newsom’s 90-day mortgage forbearance, but he singled out Bank of America for only agreeing to a 30-day pause. The governor said he hopes Bank of America will come around and “do the right thing” and that his office is working with all of the banks on streamlining the mortgage relief applications.

Federal regulators have also announced flexibility and forbearance plans for millions of Americans with loans guaranteed by Fannie Mae and Freddie Mac.

While President Donald Trump is pushing for normalcy by Easter, Newsom reiterated the state’s outlook is eight to 12 weeks and urged Californians to remain patient and vigilant.

“Let us not run the 90-yard dash on these stay-at-home orders. We can bend the curve, we can defeat this virus.”

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